Why Is Everyone Talking About Novo Nordisk Stock?

Novo Nordisk (NYSE: NVO) is grabbing plenty of headlines of late, and has been a hot topic among pharmaceutical investors for the past few years. Unfortunately for the Denmark-based drugmaker, many of the company-specific developments that have generated attention have weighed on its stock price. Novo Nordisk's shares are down by 47% this year alone.

What exactly is going on with the pharmaceutical giant? And is it worth buying its shares at current levels? Let's find out.

Novo Nordisk cuts its guidance, again

Novo Nordisk has been a leader and pioneer in the GLP-1 market. However, the company is now losing ground to its biggest competitor, Eli Lilly. As of August, Novo Nordisk's share of the GLP-1 space was 49.3%, down from 55.7% in the same period last year. Its top line through September -- most of which it makes thanks to its GLP-1 medicine -- grew by 12% year over year to 229.9 billion Danish kroner ($35.6 billion). That's pretty good for a pharmaceutical giant, but Eli Lilly's GLP-1 portfolio is growing much faster than that pace.

Image source: Getty Images.

Furthermore, Novo Nordisk lowered sales growth guidance for its fiscal 2025. It now expects the top line to increase by between 8% and 11%, down from its most recent projection of 8% to 14%. The drugmaker cited lower growth expectations for its GLP-1 medicines, including Wegovy and Ozempic, as the reason for the guidance change.

This isn't the first time it's done so; in fact, it has almost become a habit for Novo Nordisk over the past few quarters. The market despises uncertainty. So it's not surprising that Novo Nordisk's shares are moving in the wrong direction, even if we ignore other factors impacting the company.

Looking at other developments

Will the stock remain southbound for the foreseeable future? There are some reasons to think so. One of them is that Novo Nordisk recently struck a deal with the White House to offer Wegovy and Ozempic at reduced prices for some patients, including those covered by Medicare and Medicaid, provided they meet certain requirements.

Given that its GLP-1 portfolio is already struggling, selling these drugs at a discount is probably not what Novo Nordisk had in mind. The company is looking to turn things around, though, and it has made several moves to that end. One of them turned into one of the biggest acquisition battles witnessed in the pharmaceutical industry for some time. Novo Nordisk made a bid to acquire the mid-cap biotech Metsera (NASDAQ: MTSR), after the latter company had already agreed to be acquired by Pfizer.

Here's what was at stake: Metsera's highly promising mid-stage anti-obesity candidate, MET-097i. The medicine delivered strong phase 2 results, and could carve out a niche in the growing weight-management market. Pfizer fought back with lawsuits and a higher bid, and was eventually able to pry Metsera away from Novo Nordisk. Still, this episode showed how much Novo Nordisk wants to improve its pipeline.

Is Novo Nordisk stock a buy?

Amid all the noise, there are positive signs for Novo Nordisk, too. Wegovy has earned some important label expansions over the past year that should help push sales in the right direction.

One of the most important is in treating metabolic dysfunction-associated steatohepatitis (MASH), a disease that is linked to obesity and affects millions of patients in the U.S. alone. Wegovy became only the second medicine -- and the first in the GLP-1 category -- to earn U.S. approval in MASH. There is significant potential there.

An oral version of Wegovy could also earn the green light in weight management. That would significantly expand Novo Nordisk's reach, as oral pills are easier and cheaper to manufacture at scale. Additionally, even the deal with the White House isn't all bad, as it also came with a three-year tariff exemption.

Lastly, Novo Nordisk has important medicines in the pipeline. CagriSema has proved effective (albeit not quite as much as Novo Nordisk wanted) in weight management in phase 3 studies, and recently showed the ability to reduce blood pressure in other clinical trials. The company's amycretin posted strong phase 2 results in weight management, and is now in late-stage trials of both oral and subcutaneous formulations.

And Novo Nordisk has already expanded its pipeline through acquisition. Even without the Metsera deal, the company's portfolio of investigational drugs in its core therapeutic area looks deep.

Finally, the stock now looks reasonably valued, especially given significant clinical and commercial catalysts on the horizon. Novo Nordisk is trading at 14 times forward earnings, versus the 17.3 average for healthcare stocks. Don't wait until Novo Nordisk recovers to buy shares; now might be the best time.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.